December 2020 Producer Price Index

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

The Producer Price Index for final demand increased 0.3 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.1 percent in November and 0.3 percent in October. (See table A.) On an unadjusted basis, the final demand index moved up 0.8 percent in 2020, after increasing 1.4 percent in 2019.

In December, the advance in the final demand index can be traced to a 1.1-percent increase in prices for final demand goods. Conversely, the index for final demand services edged down 0.1 percent.

Prices for final demand less foods, energy, and trade services rose 0.4 percent in December, the eighth consecutive advance. In 2020, the index for final demand less foods, energy, and trade services moved up 1.1 percent, following a 1.5-percent increase in 2019.

Final Demand

Final demand goods: The index for final demand goods advanced 1.1 percent in December, the largest increase since moving up 1.5 percent in May. Over 70 percent of the December rise can be traced to prices for final demand energy, which climbed 5.5 percent. The index for final demand goods less foods and energy advanced 0.5 percent. In contrast, prices for final demand foods inched down 0.1 percent.

Product detail: Nearly half of the December increase in the index for final demand goods is attributable to gasoline prices, which jumped 16.1 percent. The indexes for iron and steel, diesel fuel, jet fuel, meats, and home heating oil also moved higher. Conversely, prices for natural cheese (except cottage cheese) fell 10.8 percent. The indexes for electric power and for electronic computers and computer equipment also declined. (See table 4.)

Final demand services: The index for final demand services inched down 0.1 percent in December, the first decrease since falling 0.4 percent in April. Leading the December decline, margins for final demand trade services decreased 0.8 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services edged down 0.1 percent. In contrast, the index for final demand services less trade, transportation, and warehousing rose 0.2 percent.

Product detail: Leading the December decrease in the index for final demand services, margins for fuels and lubricants retailing fell 6.6 percent. The indexes for apparel, footwear, and accessories retailing; health, beauty, and optical goods retailing; airline passenger services; and deposit services (partial) also moved lower. Conversely, prices for portfolio management increased 1.7 percent. The indexes for long-distance motor carrying, machinery and equipment parts and supplies wholesaling, and loan services (partial) also advanced.

Intermediate Demand by Commodity Type

Within intermediate demand in December, prices for processed goods advanced 1.5 percent, the index for unprocessed goods rose 2.2 percent, and prices for services increased 0.4 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand rose 1.5 percent in December, the largest advance since moving up 1.5 percent in February 2011. Nearly 60 percent of the broad-based December increase is attributable to prices for processed materials less foods and energy, which climbed 1.2 percent. The indexes for processed energy goods and processed foods and feeds moved up 3.3 percent and 0.4 percent, respectively. In 2020, prices for processed goods for intermediate demand rose 1.3 percent, after falling 1.7 percent in 2019.

Product detail: A major factor in the December rise in prices for processed goods for intermediate demand was the index for basic organic chemicals, which increased 4.1 percent. Prices for diesel fuel, gasoline, steel mill products, jet fuel, and meats also moved higher. In contrast, the index for utility natural gas decreased 8.3 percent. Prices for natural cheese (except cottage cheese) and plywood also fell. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand advanced 2.2 percent in December, the eighth consecutive increase. Over half of the broad- based rise in December can be traced to prices for unprocessed nonfood materials less energy, which moved up 4.5 percent. The indexes for unprocessed energy materials and for unprocessed foodstuffs and feedstuffs also advanced, 2.5 percent and 0.2 percent, respectively. In 2020, prices for unprocessed goods for intermediate demand increased 1.5 percent, following a 7.3-percent decline in 2019.

Product detail: A major factor in the December increase in prices for unprocessed goods for intermediate demand was the index for iron and steel, which rose 7.7 percent. Prices for crude petroleum, raw milk, slaughter poultry, corrugated recyclable paper, and oilseeds also moved higher. Conversely, the index for natural gas fell 9.4 percent. Prices for slaughter steers and heifers and for ungraded chicken eggs also decreased.

Services for intermediate demand: The index for services for intermediate demand increased 0.4 percent in December after decreasing 0.1 percent in November. Nearly 70 percent of the advance is attributable to prices for services less trade, transportation, and warehousing for intermediate demand, which rose 0.4 percent. Margins for trade services for intermediate demand moved up 0.7 percent. In contrast, prices for transportation and warehousing services for intermediate demand edged down 0.1 percent. In 2020, the index for services for intermediate demand rose 1.6 percent, following a 1.7 percent increase in 2019.

Product detail: In December, one-third of the increase in the index for services for intermediate demand can be traced to prices for loan services (partial), which rose 5.6 percent. The indexes for machinery and equipment parts and supplies wholesaling; metals, minerals, and ores wholesaling; cable network advertising time sales; portfolio management; and long-distance motor carrying also moved higher. Conversely, prices for arrangement of freight and cargo transportation fell 4.8 percent. The indexes for hardware, building materials, and supplies retailing and for deposit services (partial) also declined.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: Prices for stage 4 intermediate demand rose 0.7 percent in December, the eighth consecutive increase. In December, the index for total goods inputs to stage 4 intermediate demand moved up 0.9 percent, and prices for total services inputs climbed 0.6 percent. (See table D.) Advances in the indexes for diesel fuel; machinery and equipment parts and supplies wholesaling; portfolio management; gasoline; iron and steel; and metals, minerals, and ores wholesaling outweighed declines in the indexes for hardware, building materials, and supplies retailing; natural cheese (except cottage cheese); and deposit services (partial). (See table 6.) In 2020, prices for stage 4 intermediate demand moved up 2.2 percent, after rising 1.4 percent in 2019.

Stage 3 intermediate demand: Prices for stage 3 intermediate demand rose 1.7 percent in December, the largest increase since the index began in December 2009. In December 2020, the index for total goods inputs to stage 3 intermediate demand climbed 3.2 percent, and prices for total services inputs moved up 0.3 percent. Advances in the indexes for gasoline; raw milk; jet fuel; iron and steel; diesel fuel; and metals, minerals, and ores wholesaling outweighed declines in prices for slaughter steers and heifers, ungraded chicken eggs, and arrangement of freight and cargo transportation. In 2020, the index for stage 3 intermediate demand fell 0.3 percent, after rising 0.8 percent in 2019.

Stage 2 intermediate demand: The index for stage 2 intermediate demand advanced 1.2 percent in December, the eighth consecutive rise. In December, prices for total goods inputs to stage 2 intermediate demand moved up 2.6 percent, and the index for total services inputs increased 0.3 percent. Rising prices for crude petroleum, iron and steel, cable network advertising time sales, plastic resins and materials, portfolio management, and softwood lumber outweighed declines in the indexes for natural gas; hardware, building materials, and supplies retailing; and airline passenger services. In 2020, prices for stage 2 intermediate demand advanced 1.0 percent, after falling 3.2 percent in 2019.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand rose 2.4 percent in December, the largest increase since the index began in December 2009. In December 2020, the index for total goods inputs to stage 1 intermediate demand jumped 4.1 percent, and prices for total services inputs moved up 0.4 percent. Advances in the indexes for diesel fuel; basic organic chemicals; iron and steel; metals, minerals, and ores wholesaling; gasoline; and loan services (partial) outweighed decreases in the indexes for utility natural gas; hardware, building materials, and supplies retailing; and airline passenger services. In 2020, prices for stage 1 intermediate demand moved up 2.0 percent, after falling 2.2 percent in 2019.

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 12, 2021

Each year with the release of PPI data for January, seasonal adjustment factors and relative importance figures are recalculated to reflect price movements from the just-completed calendar year. The following seasonal information will be available on February 12, 2021 (2 workdays prior to the release of PPI data for January 2021 on February 17, 2021):

* Direct seasonal factors for PPI commodity indexes for the year 2021, * Recalculated seasonal factors for the last 5 years (2016-2020) for PPI commodity indexes, * Recalculated seasonal factors for the last 5 years (2016-2020) for PPI Final Demand- Intermediate Demand indexes, * Recalculated seasonal index data for the last 5 years (2016-2020) for Final Demand- Intermediate Demand and commodity indexes. This revision to seasonally adjusted indexes for the previous 5 years will be posted to the PPI database on the BLS website.

In addition, the following relative importance tables, which include values for December 2020, will be available on February 12, 2021:

* Final demand by individual commodities * Final demand by component series * Individual commodities of intermediate demand by commodity type * Component series of intermediate demand by commodity type * Individual commodities of intermediate demand by production flow * Component series of intermediate demand by production flow * Commodities, all levels * Wherever-provided services and construction

This information will be available on the PPI website at www.bls.gov/ppi or by contacting the PPI Section of Index Analysis and Public Information at ppi-info@bls.gov or (202) 691-7705.

PPI Updates Commodity Weight Allocations for the Final Demand-Intermediate Demand Aggregation Structure

Effective with the release of data for January 2021 on February 17, 2021, the Bureau of Labor Statistics will update the weight allocations used to calculate the Producer Price Index (PPI) Final Demand-Intermediate Demand (FD-ID) indexes to more accurately reflect recent sales patterns. While PPI commodity index weights will continue to be based on shipment values from the 2012 economic census, the proportions of these weights allocated to the various FD-ID categories will change. The new allocations will be based primarily on data from the 2012 Input- Output Accounts produced by the Bureau of Economic Analysis.

It is important to note that the allocation update will not change the PPI commodity classification system, reference base, the FD-ID aggregation structure, or historical index data. It may, however, result in substantial shifts in the relative importance figures of certain commodity components that make up the FD-ID indexes.

Relative importance figure tables for December 2020, which reflect the shift from 2007 to 2012 input-output relationships, will be available on February 12, 2021 on the BLS website at www.bls.gov/ppi. This information also may be requested from the PPI Section of Index Analysis and Public Information through e-mail to ppi-info@bls.gov or by calling (202) 691- 7705. For more information about this update, contact Jonathan Weinhagen at weinhagen.jonathan@bls.gov or (202) 691-7709.